May 5 2021
Article

Beverage Inventory Management | Measuring your pour and shrinkage to determine true profit and loss

Written by Orderly Marketing

Measuring your pour and shrinkage when you serve drinks is an absolute must for calculating your bar inventory. But it’s only the beginning to determining your profits and loss percentages. So what are your actual cost percentages versus your optimal cost percentages and how do you determine those calculations?

Pour and usage

Your pour measurements are probably finitely calculated down to the millilitre, and your staff will have been trained on what constitutes a single and double pour, no doubt. After all, if it’s alcohol, that information is covered in Bartending 101 and regulated by law, known as specified quantities. Is there more to the story? Are your team free-pouring? Free-pours lead to over-pours which can easily become judgment error or habit and potentially inventory abuse.

Shrinkage

Shrinkage is the disappearance of pre-calculated inventory volume. If you’re in the business, you will already be au fait with this concept, but maybe your measurement methods haven’t provided you with the proper tool kit to gain control over the mounting problem.

Stock shrinkage is found when your inventory usage doesn’t add up to your expected stock remainder. The discrepancies are found when you run a stocktake.

Did you know that the average bar takes a 15-20% loss of profit margin due to a mixture of employee carelessness and theft?

Stocktake

Getting the calculations right to create accurate data is the point, but if you are doing it through manual stocktake, you will be costing yourself time, and time is money. The most accurate data is not found by doing the inventory count yourself, and employing your staff to count bottle after bottle—empties, opened, and full. It is a waste of time and money when they could be mixing and selling drinks. There’s got to be a smarter way.

Zeroing in on the problem

When a hospitality establishment plays it fast and loose with their inventory management procedures, they limit their chances of survival. If you’re tallying beverage levels by ‘eyeballing’ the bottle, unless you’re a visual mathematics savant, the data will not be accurate.

Missing inventory

The dark side of any business’s profit loss is theft. Although it is no fun to talk about, theft is real, and it’s a serious problem for anyone who serves beverages.

Most employees will not rob you blind, but then many may not think that giving an attractive customer a birthday drink on the house is a form of stealing. Just because the employee didn’t personally take a drink or pocket the profits, they gave away something that didn’t belong to them.

Another scenario—where the employee does benefit personally—what if it’s been a hectic night tending bar or running food, one drink on the house won’t hurt, right? Wrong again. Theft always hurts someone, usually more than one.

Additionally – are your suppliers delivering the right amount of goods? How often do you count their deliveries and raise credit notes for missing or damaged items?

What’s the remedy for this problem? Policy clarity and proper staff training is a must, but there’s another safeguard against inventory shrinkage.

Weighing the odds

In this case, “odds” means open bottles of stock. If you are not weighing your open product, you need to start immediately – especially for high value items. It’s the only way to get an accurate reading of your inventory and detect problems.

Finding your formula

Try these formulas to gauge your pour and shrinkage percentages.

 Product variance | Variance (£) = Cost of Goods Sold (£) - Inventory Usage (£)  Variance percentage | Variance (%) = Variance (£) / Inventory Usage (£)  Pour Cost | Pour Cost (%) = Inventory Usage (£) / Total Sales (£)

The solution – POS to inventory management software

Learn how to gain order and control over your genuine profits and loss, calculate your true data, and stop further inventory losses from burying your business with Orderly, an award-winning, specialised inventory management solution for the food and beverage service industry.

Our cloud-based software has everything your beverage operation needs, to name a few: inventory forecasting and order management, supply chain management, seamless POS integration, and accurate receipting with automatic credit note generation and smart stock-takes. Visit our website and book your free demo.